Pawnbrokers pitch loans to kings and queens

With holiday bills starting to come due, even some affluent Americans may be looking for a source of quick cash. But these days, the wealthy are increasingly likely to be wooed by lenders from a place outside the traditional financial realm—the local pawnshop.

In recent years, the pawn industry, once saddled with a skid-row reputation, has targeted a more mainstream and sometimes downright wealthy clientele by offering to deliver short-term cash with speed and discretion. See Pawn shops enter holiday-shopping fray

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Colorado-based Pawngo, an online pawnbroker that launched in 2011, is appealing to the moneyed set by advertising loans of up to $1 million “without financial disclosures or bank hassles.” Some established pawnbrokers also are pursuing the high-end market: Beverly Loan Co., a 75-year-old business in Beverly Hills, Calif., that describes itself as an “upscale collateral lender,” is adding a Manhattan branch this year.

More surprising, industry analysts say, is that at least some wealthier borrowers are responding positively to the pitch—despite interest on loans that can reach 240% a year. Indeed, the growth in the higher-end segment is helping fuel the pawn business as a whole, according to Marketdata Enterprises, a Tampa, Fla., research and consulting firm. It estimates that pawnshop revenue topped $15.5 billion in 2012, a 7.2% increase from the previous year, and it projects similar growth in 2013. “People who wouldn’t ordinarily go to a pawnshop are considering services like this,” says Marketdata research director John LaRosa.

To be sure, some of this white-collar growth reflects the economy’s lingering struggles. But pawnshop owners say more upscale clientele are responding to a different kind of economic pressure: With credit tight, even the rich can’t always get a traditional loan on short notice. Finding bank financing can be particularly thorny for small-business owners with cash-flow issues.

“We can hand out $100,000 in a matter of 10 minutes,” says Jordan Tabach-Bank, chief executive of Beverly Loan. Mr. Tabach-Bank says his well-heeled loan applicants often only need a cash infusion as a “bridge” if they are buying a home while selling another, or to jump into an investment opportunity. Among the common collateral: artwork, diamonds and gold.

Pawn shops enter holiday-shopping fray

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As retailers like Tiffany, Saks, Best Buy and Wal-Mart vie for last-minute holiday sales, customers are being drawn away by a growing crop of competitors: pawn shops. Andria Cheng has details on Lunch Break. Photo: Getty Images.

Even borrowers who can get a conventional loan may still prefer the pawn route because it is relatively streamlined and private, with no loan committees or reporting to credit agencies. Indeed, all that most pawnbrokers require from applicants is identification and, of course, an item to be used as collateral. (Once the loan is paid off, the borrower can reclaim the item.)

Still, there’s a literal price to be paid—namely, those eye-popping interest rates. For that reason, financial advisers continue to advise borrowers to exhaust every other option—a home-equity line of credit, a loan from a family member or a high-interest credit card—before pawning anything. “A credit card that’s 25% a year is cheaper than a loan that’s 25% a month,” says Michael McGervey, president of McGervey Wealth Management in North Canton, Ohio.

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